General Mills (NYSE:GIS) has been an outperformer on the stock market for the past five years, but that doesn't mean it's been an easy road for the company. New competitors are eating into market share, and international growth isn't going as planned. Still, the company keeps pumping out a strong dividend, which now yields 3%, and with investors looking for safety, the stock seems like a wise pick. But there may be more risk than there appears to be in General Mills' stock.

GIS Total Return Price Chart

GIS Total Return Price data by YCharts.

Financial performance won't impress anyone
You can see below that the last five years haven't been great for General Mills financially. Net income has plunged, primarily because of natural and organic competition and a drop in demand for cereals. The company has made acquisitions like Annie's and Epic to stem the loss in sales, but that strategy could take years to make a big dent in financials. 

GIS Revenue (TTM) Chart

GIS Revenue (TTM) data by YCharts.

The risk here is that negative trends continue. And I don't see why they won't. Breakfast cereal isn't the staple it once was, General Mills is having trouble growing internationally, and new organic and natural brands are taking market share. There's not much to indicate that those trends won't continue, and that means flat results may be the best investors can expect.

Is a high stock price deserved?
The factors surrounding General Mills that I've outlined above paint a fairly negative picture of the company. So, why is the stock outperforming the market over the past five years? This chart gives the answer.

GIS P/E Ratio (TTM) Chart

GIS P/E Ratio (TTM) data by YCharts.

General Mills' price to earnings ratio has been climbing as financials have been deteriorating. In an odd twist, investors have given the company a higher valuation while I think it has deserved the opposite.

In the long run, this doesn't make much sense, even for a fairly steady company like General Mills. The company doesn't have a lot of big growth options and will likely see continued pressure on operations as consumer tastes change. 

If General Mills stock is going to fall, it'll likely be because that benefit of the doubt the company has gotten from the market evaporates -- and that's why investors should rethink just how safe this stock is. There may be more risk than meets the eye.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.